Influential business and economic media giant, Bloomberg, has warned that the Central Bank of Nigeria (CBN), maybe unable to save the Naira since it has surrendered its independence to President Muhammadu Buhari.
In a scathing piece, “Buhari Curbs Nigeria Central Bank Independence to Save Naira” the media outlet warned that Buhari has taken charge of Africa’s biggest economy currency policy.
Quoting financial experts, they caution that unless there was a reversal of policy, Nigeria will go into recession and a growth rate of only 3%, the lowest since 1999.
Speaking on the ‘take over’ of the CBN by Buhari, Robert Omotunde, an analyst at Afrinvest West Africa Ltd., said, “Definitely the independence of the Central Bank of Nigeria at the moment is undermined.”
Omotunde’s company which manages the equivalent of $500 million investment in the region added, “It further dampens confidence in the Nigerian market. The argument for devaluation is so overwhelming on all fronts.”
The International Monetary Fund said growth was 3 percent in 2015, the slowest pace since 1999. A recession this year cannot be ruled out “should the status quo remain,” Andrea Masia, a Johannesburg-based analyst at Morgan Stanley, said in a research note on Friday.
“It seems like Emefiele’s just left it to Buhari,” Bloomberg Intelligence analyst Mark Bohlund said on Friday. “In the near term, monetary policy decisions look likely to be steered by the president, and according to policy prescriptions from another era.”
Buhari, 73, is a former general who last ruled Nigeria from 1983 to 1985.
Three-month naira forwards weakened 0.2 percent to 227 per dollar as of 3:12 p.m. in Lagos. That’s pared the best weekly advance on record, with the contracts rallying about 10 percent as traders scaled back the size of a potential currency devaluation following Emefiele’s decision on Tuesday. The black market rate has plunged, falling to a record 307 this week.
The governor called for coordination of fiscal and monetary policies to help steer the economy away from oil dependence, while offering few hints on whether he is ready to ease controls to compensate for a decline in crude prices, which have almost halved since June to about $35 a barrel. Nigeria relies on oil for most exports and two-thirds of government revenue.
“One would have expected the CBN to take decisions that are in the interest of the country, not whether the president likes the decision or not,” Afrinvest’s Omotunde said. “For the CBN to refuse to devalue at this point in time is enough reason for most foreign investors to stay away from the market.’
Emefiele last week stuck to foreign-exchange restrictions that have caused capital flight, curbed output and led to the naira dropping to a record low on the black market. The central bank has pegged the currency at 197-199 per dollar since March to stem its slide amid a rout in oil prices.